Ross Group receivers hold out little hope for missing $439M

Ross Group receivers hold out little hope for missing
$439.4M

By Pattrick Smellie

Nov. 14 (BusinessDesk)
- Court-appointed receivers have found records for just
$10.2 million of the $449.6 million in investments
purportedly managed by Ross Asset Management, a boutique
Wellington investment firm run by David Ross, who has been
hospitalised since a Financial Markets Authority raid on his
premises earlier this month.

Preliminary investigations
also suggests $60 million more was paid out by Ross to
investors than was taken into his investment funds over the
past five years to September, with a $24 million deficit of
repayments to contributions in the past year alone.

John
Fisk and David Bridgman of accounting firm PwC recommend
that rather than spend more on the receivership, which has
already cost $107,355, that the various Ross-related
entities be placed in liquidation on the basis that the
investment fund is "insolvent" with "a very significant
shortfall identified to date as owing to investors."

"The
returns to notified investors over the last 12-plus years
would appear to be unrealistic and in all likelihood
aggregated or falsified," their report says. "The Ross Group
is currently unable to return even a small fraction of the
reported value to investors."

Ross, formerly a share
broker, managed funds on behalf of 900 privately wealthy
individuals. A table in the 27 page report shows management
fees averaging $4.4 million a year were paid in each of the
last three years, and that fees had run at well above $1
million a year since 2004.

The PwC investigation found
inadequate record-keeping and has been unable to source much
of the documentary evidence for trading and investment
holdings that it needs to complete a full picture of what
looks to have the characteristics of a Ponzi-style scheme,
where investors were paid out at least in part using other
investors' funds.

"Withdrawals by investors during these
periods (the last five years), appear to have largely been
funded by pooled funds which include the contributions made
by other investors, coupled with the sale of investments,"
says the report by the receivers, who were appointed by the
High Court last week to secure as best they could the Ross
assets. "This is of concern given the group's inability to
meet further withdrawal requests made by investors in the
last six months."

Amongst records found were a number of
investments with lower values than the original cost prices
recorded by Ross.

"Furthermore, we have evidenced from
recent contract notes of the group, trading losses on a
number of shares, many of which appear to be low value and
high risk stocks."

The Ross group's database purports to
show investments worth $449.6 million, of which $152.4
million is said to be held in Australian investments,
another $136.1 million in Canada, some $156.4 million in the
US, $3.8 million in New Zealand, and $943,332 elsewhere. Of
this, some $437.6 million was held by a Ross group
subsidiary, Bevis Marks.

However, assets worth just $10.2
million, and $200,000 in cash deposits, had been identified
in the receivers' initial searches, which they described as
a matter of "considerable
concern.'

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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